Prepaid card products have today achieved a critical level of industry, marketplace and consumer acceptance and usage where they can now be considered a stand-alone payment category. These innovative prepaid products also represent some of the most robust growth opportunities for card-based payments today and for the foreseeable future. The growth of these cards and related transaction volumes has been accelerated by virtue of the continuing invention, development and enhancement of sales and usage functionality.
Therefore as an effort to improve upon existing prepaid card transactional capability, it would be desirable to enable information and transaction enhancements that would improve cardholder and merchant experiences and reduce issuer costs associated with consumer services.
Currently, many owners of prepaid products are unsure of their available balance, even though balance information may be available through devices such as telephones, ATM's, and Internet sites. Often, prepaid product cardholders are at a merchant location and do not know whether their available balance is sufficient to complete a purchase at a physical point-of-sale, or over a non-face-to-face purchasing channel such as by telephone or over the internet. Without this information, merchants can experience lost sales or excessive time spent at checkout or over the phone or internet, trying to determine if a sale will be approved.
Also, it is often difficult for the consumer to spend the exact amount available in the prepaid account, as purchases can be for amounts greater than the value available. This can result in unnecessary declines. For example, a consumer may have $25 on her prepaid card, and she may try to purchase a good for $30. This transaction would traditionally be declined, because there is insufficient value associated with the prepaid card to pay for the good.
Recognizing that there are unique opportunities in these situations for both the consumer and the merchant, embodiments of the invention address these issues by improving existing prepaid transaction processes and significantly reducing the uncertainty about a prepaid product's available funds.
FIG. 1A shows a simplified flow diagram illustrating steps of a conventional method for executing a financial transaction. FIG. 1B shows a simplified schematic diagram of the method of FIG. 1A.
In first step 202 of flow 200, a consumer tries to pay for a good or service that costs $50 by using a first portable consumer device such as a prepaid card in a financial transaction. In second step 204, the merchant sends through an electronic payment processing system (such as VisaNet), a request for authorization of the full amount of the transaction.
In step 206, the issuer checks the balance remaining on the prepaid card, and notes that it is less than the full requested purchase amount. Accordingly, the issuer transmits back to the merchant through the electronic payment processing system, a message declining authorization of the transaction. This decline message may, in certain cases, also include the amount of the balance remaining on the prepaid card.
In many prepaid programs, issuers use third party processors for authorization and settlement. For purposes of this application, the term “issuer” refers both to the actual issuer, and to a third party engaged to conduct authorization and settlement on behalf of the issuer.
Upon receipt of the issuer's decline to authorize the transaction, in step 208 the merchant, on its own initiative, may seek to conduct a separate, second financial transaction. In the second financial transaction, the merchant may send another authorization request message to the issuer. It may be used to ask the issuer to approve payment in the amount of the balance associated with the prepaid card (e.g., $25). In step 210, the prepaid card issuer approves the second financial transaction. In step 212, the merchant requests from the consumer the additional portion of the funds to pay for the good. For example, the merchant may ask the consumer to tender an additional $25 to make up for the difference between the cost of the good and the amount of money available on the prepaid card.
In concluding step 214, the consumer tenders the additional payment from a source of funds other than the prepaid card. This alternative source of funds could comprise cash, a check, or a credit card, or even some combination of these.
The conventional financial transaction method shown and described above in connection with FIGS. 1A-B can be used to complete a purchase transaction. However, this approach has a number of disadvantages.
For example, the transaction methodology is expensive to the merchant, because two separate requests (indicated with an * in FIG. 1B) for approval of the transaction are required to be transmitted through the payment processing system. By agreement, the merchant is generally charged for each of these approval requests. This increases merchants' costs and may reduce the merchants' profitability.
The conventional transaction method of FIGS. 1A-B is also cumbersome for the consumer. Specifically, the consumer must offer the prepaid card twice to the merchant, and wait while the merchant runs the two separate transaction requests through the payment processing system and receives two responses to those requests. Although this may not seem too burdensome or costly when viewed in isolation, millions of prepaid card transactions are conducted on a daily basis. The cumulative effect is potentially reducing the number of authorization requests and improving the efficiency of such purchase transactions is significant.
It is also worth noting that the conventional method shown in FIGS. 1A-B represents a best-care scenario, in that the payment processing system is configured to include the remaining balance in the message indicating the issuer's decline to authorize the original transaction. This extra functionality allows the consumer and merchant to know the exact balance remaining on the prepaid card, and to be assured of approval of the second request for authorization of the lesser amount.
However, most existing payment processing systems do not provide any remaining balance information with returned decline messages. This opens up the possibility that more than two authorization requests would be needed before a consumer would be able to use a prepaid card to buy a good or service that has a value that exceeds the available balance on he prepaid card. Such an iterative process would add additional expense, delay, and uncertainty to the purchase transaction.
Accordingly, there is a need in the art for improved transaction methods and systems conferring flexibility to the use of prepaid cards and other instruments utilized to conduct financial transactions.